The Unit Trust of India, the country’s largest mutual fund with an overall corpus of over Rs 50,000 crore, is proposing to merge a number of schemes as part of a major restructuring of its portfolio of schemes.

As a first step, the fund’s top management will be assessing the possibility of merging the nine Master Equity Plans (MEPs) with a combined value of Rs 2377.64 crore as on June 30, 2000. The perception is that the schemes have synergy and commonalities that will allow UTI to blend them into one scheme.

“It is under our consideration to combine the nine MEP schemes”, a senior UTI official told The Telegraph. The mutual fund’s proposal to consider merging the nine MEP schemes has been sparked by the need to improve portfolio management and investor servicing, say UTI officials.

UTI launches a new MEP scheme every year. This can be avoided if the MEP schemes are merged and open-ended, say analysts.

It will help UTI save considerable marketing costs and enable fund managers to focus better on servicing the portfolio. If the merger plan is implemented, the merged MEP will be a open-ended scheme with a initial lock-in period of three years.

However, the proposal is still in the embryonic stage and will require the consent of the regulatory authorities and unit holders of all the nine schemes.

“It is going to be time-consuming process since it will be the first of its kind for us”, he added. According to analysts tracking the mutual fund industry, the MEPs have been earmarked for merger as they are pure equity schemes with a similar objective and investment strategy. That will make the process easier for UTI, they said.
The MEPs are essentially tax-saving schemes with a lock-in period of three years. The move is also seen as a strategy to ignite investor interest in MEPs, say industry circles.

Over the past few years, investor interest in these schemes has been flagging.
The last three schemes have seen investor interest tapering sharply. While MEP ’97 touts a size of Rs 93.04 crore, the size of MEP-98 and MEP-99 is said to be in the region of Rs 28.74 crore and Rs 6.87 crore.

Among the big ticket portfolios
under the MEP label are the 1992 and 1995 schemes which have a portfolio size
of Rs 672.27 crore and Rs 572.36 crore respectively.

Earlier, there was speculation about the merger of schemes like UGS 2000, UGS 5000 and UGS 10000. However, the similarities of the MEP schemes has clinched the issue in their favour.

The UGS schemes are difficult to
merge as the portfolios differ from
each other. While UGS 2000 is well
known in the mutual fund industry as an FMCG fund, the other funds like UGS 5000 and UGS 10000 have a different portfolio content. That makes merger a difficult proposition.

ESSAR STEEL FRN HOLDERS ACCEPT ROLLOVER

FROM OUR CORRESPONDENT

Mumbai, Aug 16:

Essar Steel Ltd finally earned a reprieve today after holders of its floating rate notes (FRNs) agreed to a rollover for a further period of five years.

A resolution to this effect was passed by 97 per cent of the holders of the 250 million pound sterling FRNs at the extraordinary general meeting in London held on August 15, Essar Steel said in a statement released today. There were no votes against the resolution, it added.

The FRNs had become due for redemption last August and the company had been in protracted negotiations with its FRN holders to find a to break the impasse after the principal holders had baulked at a rollover.

The repayment of the FRNs will commence in phases with 10 per cent of the value of the notes falling due in the third year, 10 per cent in the fourth year, and the balance to be repaid in the fifth year.

“With this the issue of default stands settled,” Essar claimed in the statement.

Among the two options given to the FRN holders, 70 per cent opted for Series A, meaning a rollover of five years with a lower interest rate. The rest settled for a call option that could be exercised in the first three years for early payment at the company’s option with discount.

Essar claimed it as a reflection of the confidence reposed by a huge majority of note holders to continue as creditors to the company even at a lower interest cost.

Essar recently turned the corner in the first quarter of the fiscal year ending 2001 with a net profit of Rs 4.83 crore. While the total income for the first quarter showed an increase of 50 per cent at Rs 692.74 crore over total income of Rs 462.91 crore in the corresponding period of the previous year, the earnings before interest, depreciation, taxes rose by 411 per cent at Rs 224.4 crore against Rs 43.89 crore in the corresponding period.

The company proposes to reduce its debt and cost of debt through liquidation of current assets and investments to the extent of Rs 800 crore. The company in the statement also claimed that it proposes to reduce interest costs by Rs 300 crore and, finally, extending the long term debt from two-and-half years to eight years.

DECKS CLEARED FOR SUGAR EXPORTS

FROM OUR CORRESPONDENT

New Delhi, Aug 16:

The government may allow sugar exports above the current ceiling of 10 lakh tonnes due to improved international prices.

“We are ready to export more than 10 lakh tonnes of sugar because the current international prices are favourable. Also, a lower output in Brazil has improved our export prospects,” consumer affairs and public distribution minister Shanta Kumar said here today.

He said his ministry was confident of achieving the sugar-export target fixed for the current financial year. The ministry of commerce has already issued trade orders, and exports will are likely to commence any time now, Kumar said.

The commerce ministry today issued the notification granting permission for sugar exports up to 10 lakh tonnes. In the order, the ministry said exporters would have to register and get their allocations from the Agriculture and Processed Food Products Development Authority (APEDA).

The government had allowed exports in June to clear surplus stocks. It had also announced levy exemption on exports to make the commodity competitive in the international market.

Kumar said the government had made up its mind on the recommendations made in the Mahajan Committee report, and will soon place its views on before the Cabinet.

Though the government has been able to sell only a negligible amount of wheat under the open-market sale scheme (OMSS), it is confident that it will offload about 50 lakh tonnes under the scheme at reduced prices by September. The price was slashed last week from Rs 700 per quintal to Rs 650, but wheat prices dipped further, and rendered the OMSS ineffective.

“We are confident of selling the entire wheat stock through the scheme at revised prices of Rs 650 per quintal in Punjab and between Rs 720-740 per quintal in other zones before the commencement of the next procurement season in October,” Kumar said.

He said the prices were fixed on the basis of the economic cost of wheat in Punjab.

The final figure, calculated after consultations with the finance ministry, excluded the annual carrying cost for eight months based on an annual charge Rs 2,200 per tonne.

The Centre had announced the OMSS scheme in July to reduce the pile-up in buffer stocks, but had been unable to sell wheat despite a Rs 200 per tonne reduction in the sale price.

Stocks in the central pool have been mounting due to the poor lifting of the grain under the public distribution system (PDS) by state governments. As on July 1, the government was burdened with a massive wheat stock in the central pool of 277.57 lakh tonnes against a buffer norm of 143 lakh tonnes, which had led to a surplus of 134 lakh tonnes.

Cyber crime probe

The government proposes to set up an infrastructure like the one in the American Federal Bureau of Investigation (FBI) to probe cyber crimes, information technology minister Pramod Mahajan told the Lok Sabha today.

He said his ministry has framed guidelines, the draft of which has been put on the Web for public comments.

PENTASOFT DEFERS SHIFT TO DUBAI

FROM M RAJENDRAN

New Delhi, Aug 16:

Pentasoft Technologies Ltd has put off its plans to move its CD-ROM manufacturing unit to Dubai from the export processing zone (EPZ) in Chennai.

PentaMedia Graphics Ltd, a multimedia authoring tool, had plans to shift its manufacturing unit to Dubai because the salinity in Chennai was not conducive for maintaining quality in CD-ROMs.

Sources in ministry for information technology confirmed that the company had “plans to shift its CD-ROM factory to Dubai due to environmental constraints in India.”

Company sources said, “We were exploring many areas within and outside the country since experts had said that salinity brings down the life of CDs. We have undertaken an intensive study on this issue and soon the decision would be taken based on the report. But no final decision has been taken. The officials in Dubai also delayed in giving necessary approval.”

Meanwhile, Pentasoft Middle East, a wholly-owned subsidiary of Pentasoft Technologies Ltd, is likely to set up a base in the Dubai Internet City through one of its two entities — Pentasoft and 3CRC.

Pentasoft has already set up office in Dubai and 3CRC Middle East is a new company focused on development of computer aided design/computer aided management (CAD/CAM) and GIS software solutions and services.

“It is yet to be decided which of the two companies will be set up in the Dubai Internet City,” sources said.

The company is also exploring the market to enter partnerships with local companies in the region.

“Initially, we will focus on UAE, Oman and Bahrain. We are also talking to local companies in Kuwait and Qatar. We already have tieups with Bahrain, Hitech, to develop software solutions,” sources said.

Pentasoft had recently tied up with Dubai- based Interactive Technologies, specialists in e-commerce applications, web designing and Internet consulting to front-end business.

For Interactive, Pentasoft has created an offshore development centre in Chennai with
dedicated resources including manpower.

Pentasoft Technologies Limited registered a 467 per cent jump in net profit for first quarter ended June 30, 2000 at Rs 29.99 crore as against Rs 5.29 crore for the corresponding quarter last year.

The company has been assessed at SEI CMM level 4 by KPMG Consultancy Pvt Ltd. The Company has established a
software development centre in Secunderabad, Andhra Pradesh. It has also taken up around
100,000 sq. ft in Tidel Park, Tamil Nadu.

HUNT BEGINS FOR NEW ONGC CHIEF

FROM R. SASANKAN

New Delhi, Aug 16:

The ministry of petroleum and natural gas has started looking for a candidate to succeed Bikas Chandra Bora as the ONGC chief after he retires in April.

Bora, who completes his five-year term this month, has been asked to continue till March, a senior official in the ministry said. Official circles say the absence of inspiring candidates from within may result in an outsider heading this premier upstream company. The Public Enterprises Selection Board (PESB) is now shortlisting candidates so that the interviews can be held either in September or October.

Almost all of them have their connections — bureaucratic, political, industrial and even religious. Ram Naik, the minister, has not shown preference for anybody though. Nor has S. Narayanan, the petroleum secretary. It now appears that the secretary had already assessed the strength and weaknesses of these candidates, and his evaluation, if endorsed by the minister, will influence the PESB.

The present PESB does not believe in going against the wishes of the administrative ministry.

Even if Narayanan moves to the finance ministry before the interviews are held, as is being speculated, his successor will certainly take into consideration his assessment, which will be on record.

Official circles acknowledge that finding a suitable candidate outside ONGC is not going to be easy. However, the ministry is willing to consider even non-oil executives with proven track-records. “We are looking for doers and not talkers,” said a senior official. The extended term will enable Bora to launch the re-development plan for Bombay High North, which has almost been finalised. It will be followed by a bigger plan for Bombay High South.

Bora has been wrestling with the production problems at Bombay High and has succeeded in working out a scheme to increase production. It will be executed with help of foreign consultants without parting with a share in production.

DABUR, ICICI FILE INSURANCE APPLICATIONS

FROM OUR CORRESPONDENT

New Delhi, Aug 16:

Dabur and ICICI were among the first companies to apply for licences after
the Insurance Regulatory and Development Authority (IRDA) started accepting applications today.

While the FMCG major has tied up with US insurance major Allstate for its insurance foray ICICI has joined hands with Prudential. Both companies have plans to enter the life insurance segment.

There were no applications to enter the non-life or general
insurance sector on the first day of the filings, top officials of IRDA said.

ICICI and Dabur are among those who intend to take on the might and muscle of Life Insurance Corporation (LIC), which has straddled the sector like a Colossus.

The two companies are planning to pick up 74 per cent in their joint ventures with their foreign partners — Prudential and
Allstate — who would be minority shareholders with 26 per
cent.

Dabur had earlier tied up
with US-based Liberty group for its life insurance foray but the contract did not materialise because of long delays in government policies and a rethink by the foreign partner, sources in the company said. The company later teamed up with AllState Insurance.

So far, more than a dozen global firms have already announced their partnerships with Indian companies, but several more are still scouting for partners.

With the first batch of companies filing applications, many more are expected to follow suit in the coming weeks.

Sources said the IRDA will be cautious in issuing licences
and will do so only after putting the proposals stand up to its scrutiny.

Banks, however, have
missed the opportunity to
apply in the initial lot because the government has not amended the Banking Regulation Act 1949, which will permit them to enter the sector.

Many, like State Bank of India, have drawn up big plans for insurance.

Meanwhile, the insurance watchdog hopes to issue the
first licence by the end of September or early October. Earlier,
it had promised to do so by
Diwali.